Lloyd's increases premium levy to 2%

LLOYD'S today confirmed it is increasing the premium levy on all syndicates in the market to 2% from the beginning of next year.

The move is expected to boost the assets of the Central Fund, which is responsible for paying claims when syndicates and capital providers are unable to meet their liabilities, to $1bn.

Nevertheless, Lloyd's chairman Sax Riley was keen to stress this action did not mean the market was expecting widespread failures among its participants.

"Clearly some business failures are possible, but this [levy increase] strikes us as a sensible precaution when facing so many unquantifiable aspects of the tragedy at this time," Mr Riley said.

Furthermore he added: "The worldwide upsurge in premium income caused by rising rates means this is the right time to take steps to build up reserves for the medium to long term."

Syndicates pay the premium levy to the Corporation of Lloyd's on a monthly basis. The annual Central Fund contribution made by Lloyd's insurers based on capacity remains unchanged at 1%.